The retail investing subreddit r/WallStreetBets has been on the mainstream investing world’s radar for the better part of two years now. It’s a world of no-holds-barred, run-and-gun option trading. And the success stories are proof retail traders can in fact win fast and big. It’s a community that receives as much admiration as it does admonishment. And it’s certainly one whose influence remains strong. So, investors pay attention to what the community is talking about. This week, one ticker is taking up lots of bandwidth on the board — Nvidia (NASDAQ:NVDA) stock.
It’s not particularly surprising that Nvidia is a hot topic among investors. The chip maker was thrust into the spotlight on and off throughout the first half of the decade. Supply-chain shortages have spelled bearish disaster for NVDA stock, while the CHIPS Act brought optimism. But artificial intelligence (AI) has stoked the fires around Nvidia like none other.
AI technology has been growing since the latter half of 2022. Generative art programs have landed in the public’s hands, kindling a wider interest in the decades-old technology among investors like never before. The release of OpenAI’s ChatGPT has grown this interest exponentially, as now one can ask AI to do all sorts of tasks.
Nvidia, a developer of one of the most sophisticated AI microchips, has thus been a key player in the race to develop more complex AI tools. With its A100 graphic processing unit, Nvidia holds a jaw-dropping 95% of the market for machine-learning hardware. And the news has come just in time to upend retail investors’ expectations for Nvidia’s earnings week.
AI Hype Turns the Tables for NVDA Stock
Reddit’s r/WallStreetBets has evidently been divided on their vision for Nvidia’s earnings report. The company had struggled throughout Q4, and its report reflected this. However, AI hype allowed NVDA to defy expectations and soar.
There are equally as many posts from happy call option traders who forecasted the AI boom levering NVDA stock upward as there are angry put option traders who didn’t expect the hype to completely overrule the company’s poor numbers. In true r/WallStreetBets fashion, many users had gained or lost tens of thousands of dollars on the backs of these trades.
But beyond the posts showing off these sizable gains and losses, the report is prompting discussion around the power of buzzwords in tech. Indeed, the report itself is not impressing any NVDA investor. GPU sales were down 42% year over year. The report showed a decline in net income of over 50% compared to last year’s. Quarterly revenue is down 21% over last January’s. On paper, this should’ve been disheartening to NVDA stockholders.
However, even with these losses, the company did beat analysts’ floor-level expectations, saving the company some face. But that’s not the reason for the 13% jump in stock prices following the report. It’s the dozens upon dozens of mentions of the word “AI.” Nvidia knew that it wouldn’t be revealing a flashy earnings report, but it does know what tech investors want to hear. Nvidia executives aren’t afraid to give it to these investors, either. By leaning into the hype, the company was able to flip bears’ expectations and send bulls’ positions surging.
Now investors are left to wonder whether this is a healthy practice for tech. As one user points out, Nvidia has coasted for months on the back of crypto-mining and metaverse hype. Another pointedly states that “we are in a time of fools-gold rushes, and NVDA is selling shovels.” Whether AI turns out to be the “technology of the future” or mostly useless is up in the air. But it’s certainly worth scrutinizing.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.